Google And Amazon Use Music Streaming To Boost Home Speakers And Subscriptions

Amazon and Google have both launched free, ad-supported music streaming services through Alexa and Google Home-enabled devices, respectively.

Until now, Spotify was the only on-demand music streaming provider to offer both a free, ad-supported tier and ad-free subscriptions.

We believe the services’ objective is to boost Amazon and Google’s smart speakers and subscription services as a new business model, not become significant revenue sources.

Amazon’s and Google’s new services will be competing directly with Spotify, which until now was the only on-demand music streaming provider to offer a free ad-supported tier and ad-free subscriptions. Spotify’s revenues come mostly from its subscription service, even if the free, ad-supported segment has been particularly successful in 2018, with ad-supported revenue growing 35% year-on-year (y-o-y) in Q418 and reaching 116mn monthly active users. That is to say, we do not believe Amazon and Google’s goal with this service is to grow their revenues, but rather to attract new users to smart home devices and to subscription services (see ‘From Product To Service: An Update’, April 5 2019 and 'Smart Home Battle Starts With Smart Speakers: Amazon, Google, Facebook, Apple, Microsoft’ October 12 2018)).

Amazon and Google lead the smart speaker market and the launch of a free music service is to serve as an incentive to attract users to their other services, whether that is Amazon Prime or YouTube Premium, both monthly subscription services, confirming our view of a new business model focused in creating a recurrent revenue stream.

Amazon’s free, ad-supported version of Amazon Music will be available only through its Echo speaker and other Alexa voice assistant devices. Amazon already offers two type of music streaming subscriptions: Prime Music, as part of its Prime memberships, and Music Unlimited, a standalone subscription service. Both services offer unlimited ad-free streaming, but Prime Music’s catalogue is limited to 2mn songs, compared to Music Unlimited “tens of millions”. Listeners are also restricted to playlists and stations, but cannot choose specific songs or singers.

Amazon is looking to engage new and existing users with its ecosystem of products and services, whether that is the core Amazon e-commerce side or the Prime subscription service.

For its part, Google made YouTube Music accessible through its Google Home speakers, or other Google Assistant-powered speakers, as a free ad-supported version. However, listeners cannot request specific songs either, only playlists or genres. YouTube Music was launched in 2018, offering ad-free streaming, background listening and downloads through a dedicated app. Google already offers an ad-supported free version of YouTube Music, but it does not allow background listening.

The move is also a further sign of Google shifting all of its music activity over to the YouTube brand, and away from its Google Play platform, set to disappear during 2019 (see ‘YouTube's AVOD Experiment To Deepen Viewer And Advertising Engagement’, November 27 2018).

Amazon’s service is available only in the US, while Google’s is already available in the US and 15 other countries, with plans to expand the launch.